NBAD prices five-year sukuk at 4.75pct: bankers

National Bank of Abu Dhabi has priced its 500 million ringgit ($156.9m) five-year sukuk at 4.75 per cent, bankers said, as the bank taps investors in the world's biggest Islamic bond market.

The sale is one of a handful from Middle Eastern issuers as the region struggles to recover from Dubai's debt restructuring and several high profile sukuk defaults which have rattled investor confidence.

The sukuk, which is being sold in Malaysia, was oversubscribed 3.6 times, said state-owned NBAD, the second largest bank in the United Arab Emirates by assets.

Malaysia has the world's largest sukuk market, accounting for 42 per cent of total global sukuk issuance of $19.1 billion last year, Thomson Reuters data showed.

Funds accounted for 48.3 per cent of investors, insurance companies 21 percent, financial institutions 19.9 per cent, government agencies 8.6 per cent and corporates 2.2 per cent, joint lead manager HSBC said.

"NBAD is in the best position among banks in the region to get appetite from investors because of the very low risk profile of the bank," said Sofia El Boury, assistant vice president of research at Shuaa Capital.

"In terms of debt, for NBAD the range has been between 3.5 to 5.9 per cent and anything between this bracket is good for NBAD."

Royal Bank of Scotland and the investment banking arm of Malaysia's top lender Malayan Banking are also handling the deal.

NBAD said the sale would help diversify its sources of funding.

"We believe this will now open the door for other issuers from our part of the world to tap this unique liquidity pool and strengthen further links that are established with Asian investor base," an NBAD spokesman told Reuters.

NABD was one of five lenders which was recently awarded commercial banking licences by Malaysia's central bank.

The bank, rated 'A plus' by Standard & Poor's and 'Aa3' by Moody's, recently launched a $5bn euro medium term note (EMTN) programme in the Middle East.

But few foreign issuers have tapped the Malaysian ringgit bond market over the years. In 2008, Gulf Investment Corp and Export-Import Bank of Korea each sold 1bn ringgit of bonds in the Southeast Asian country.

Large sukuk deals have been scarce so far this year but recent sales have drawn strong demand. Last month, the Malaysian government sold $1.25 billion worth of five-year sukuk at par with a yield spread of 180 basis points over US Treasuries.

Saudi Electricity Co raised 7bn riyals from seven-year sukuk, at 95 basis points above Saudi Interbank Offered Rate (Sibor) in May, below the 160 bps above Sibor at which the Gulf's largest power utility priced its previous sukuk issue of the same size.